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Setting up in India

The advent of liberalization in India did not manage to inspire confidence in business owners/ entrepreneurs or even the investors and setting up a company or business and operating it in India, continued to seem like a daunting task. 

However, with the evolutionary change in the governments’ thinking about economic growth through deregulations, corporate ease and infusion of investments via mutually beneficial operational and financial structures for investors, both domestic and overseas/ foreign investments, India now offers a wide range of opportunities to investors in setting up a business/company in India ensuring that it is no longer a distant dream to not just set up a business in India but progress exponentially. 

Reinforcing the vision of growth for India and enabling the ease of doing business in India, Ahlawat & Associates A&A provides comprehensive assistance to guide you through the best entry and exit strategy for setting up and operating in India.

Starting Operations in India

There are a number of options available to a foreign investor wanting to setup business operations in India. Taking into consideration that foreign equity in Indian companies can go up to 100%, subject to equity caps in the respective areas of activities under the policy of Foreign Direct Investment (FDI).

1. As an Indian Company: 

A foreign company/ investor that wishes to commence its operations in India can begin operations either via (i) Joint Ventures or (ii) a Wholly Owned Subsidiary (subject to 100% FDI permission for the activities being carried out)

2. As a Foreign Company:

India also provides more cost effective options to a foreign company wanting to test the waters before plunging into full fledge operations:

– Liaison Office/Representative Office:

Liaison office acts as a bridge between a primary place of business i.e. the country of origin and entities in India. No commercial activity can be undertaken in a Liaison Office, and therefore, it does not “earn” in India. Such an office plays the limited role of collecting adequate information of required market opportunities and providing data about the company / its products to the Indian market. However, with RBI (Reserve Bank of India) approvals and other permits, such a representative office can facilitate technical and financial collaborations between parent company and its Indian partner as well as encourage import & export from/to India. 

 – Project Office:

To initiate specific projects a foreign entity has the option of setting up a temporary project/site office in India. Such project offices can only carry forward the activities for which they have been permitted to set up. They are limited to execute any activity which does not fall within the scope of the project.

3. Branch Office

Foreign companies requiring a physical presence to conduct their business without the rigmarole of setting up a separate legal entity, have the option of setting up their Branch Offices in India. These branch offices are not permitted to initiate manufacturing activities on their own however they may reallocate the role to an Indian manufacturer.

A branch office of a foreign entity in India is allowed to conduct the following actions in the country:

  • Import and Export of goods
  • Rendering professional and consultancy services
  • Carry forward research work in relation to the business of the parent company 
  • Promoting technical and financial collaborations with Indian and overseas companies on behalf of the parent company
  • Acting as a buying/selling agent for the parent company in India and representing the parent company in India
  • Assisting the parent company in development of software or IT related requirements
  • Rendering technical support to the parent company with respect to the products or services that the parent company offers
  • Foreign airlines/shipping company

Button to FDI page –  Foreign Direct Investment – An Automatic Route

INDIA: An attractive destination for businesses

Establishing a company in India – Overview

Indian economy is one of the fastest growing economies in the world with GDP growth of around 7 – 8% and a population of over 1 billion as per World Bank Data (2016). The statistics show that India as of now, boasts of a profitable and stable economy and has already entered the league of emerging markets thus making it an attractive option for foreign investors.

The common forms of setting up business in India are:

  • Private Limited Company (PLC),
  • Public Limited Company (PC),
  • Limited Liability Partnership (LLP).

From a foreign company’s point of view, a Private Limited Company (PLC) is one of the highly recommended ways to start a business in India. PLC offers limited liability for its shareholders with certain restrictions placed on the ownership. An LLP has partners, who own and manage the business. Whereas in a PLC and PC, directors may be different from shareholders.

Brief Steps for formation of a company

  • First and the foremost step for setting up a company in India, is filing an application for reservation of a unique company name for the proposed company. The applicant has an option to provide two (2) name choices in the web application. The proposed names can either be accepted or rejected based on the scrutiny by the Registrar, Central Registration Centre (CRC). In case the applied names are not available and approved by the department, then further two more names can be provided and thereafter applied for. An approved name is valid for a period of 20 days from the date of approval.
  • The next step is obtaining a digital signature certificate (DSC for proposed directors and shareholders) and Director Identification Numbers (DIN) for proposed directors. As per the applicable law, for incorporating a PLC, a minimum of two directors is required and one of them needs to be a director resident in India. Also, it is mandatory for all proposed directors to hold a valid DIN.
  • Once the name is approved, the drafting of company incorporation documents such as declarations by directors and shareholders, memorandum and articles of associations (MOA and AOA) and documents relating to registered office addresses of the company and filing it on the web portal of MCA registry will be done.
  • The PAN and TAN are also applied simultaneous to the company Incorporation.
  • As per the recent amendments, a web based filing, i.e. SPICe+ shall be undertaken for incorporation of a company and shall be accompanied by the e-form AGILE-PRO for mandatory application for the following additional registrations for the company:
  • Goods and Service Tax Identification Number (GSTIN)
  • Employees’ Provident Fund organization (EPFO) registration  
  • Employee State Insurance Corporation (ESIC) 
  • Profession Tax Registration 
  • Opening of Bank Account 
  • Once the application is approved by the CRC, a Certificate of Incorporation is issued to the company as a proof of registration of the company with the MCA.
  • Additionally a company with share capital, shall not commence any business or exercise any borrowing powers unless it receives the certificate of commencement of business from the Registrar of Companies (ROC).

Note: Alternatively, instead of filing separate DIN Applications and Name Application, we can also apply for Director Identification Number of maximum three Directors and the name for the proposed company in the incorporation application itself, however, in this case, we can apply with one name only with utmost surety that the proposed name is unique.

Post Incorporation: The legal work does not end with incorporation of the company. Post incorporation a company needs to undertake a series of compliances and statutory registrations, such as, maintaining of books, allotment of shares, obtaining Import Export Code (IEC),  and undertaking day to day secretarial compliances and other services which A&A provides to its client on a daily basis as an In-house/ General Counsel legal service.

Role of Ahlawat & Associates in Setting up in India:

  • Providing advisory on Entry Strategy and structuring of most feasible business set up options in India.
  • Identification and selection of the place of business as per the specific needs of the client.
  • End to end assistance in incorporation of the Company/LLP/Branch or Liaison Office in India.
  • Assistance with corporate bank account opening.
  • Providing Investment related advisory to the companies.
  • Assisting with obtaining various regulatory approvals and registration.
  • Assistance related to ongoing compliance under various laws and regulations.
  • Accounts and Payroll maintenance
  • FEMA related filings including FLA return, FC-GPR, FC-TRS and other RBI filings.


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